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Shares in Turkey’s Garanti Bank lost ground on Wednesday after Spain’s BBVA said it had increased its stake close to 50 per cent by buying a 10 per cent holding at a chunky discount from Dogus Holding.

The TL3.3bn (€859m) acquisition represents a doubling down on Turkey for BBVA, which has faced concerns about its sizeable emerging market presence from investors.

Dogus, the investment vehicle of Turkish billionaire Ferit Şahenk, sold the shares at TL7.95 per share – a discount of 12 per cent to their closing price on Tuesday night. BBVA said it had no plan to increase its stake beyond 50 per cent, which would force it to make an offer to all minority shareholders.

The deal sent shares in Garanti down almost 2 per cent to TL8.87 on Wednesday. BBVA shares were down less than 1 per cent at €6.19.

Analysts said the macroeconomic and geopolitical uncertainty over Turkey was raising concerns about BBVA’s large investment in the country, which will account for almost 10 per cent of its profits after the deal.

“As economic and political risk in Turkey continues to grow, we see this as adding unnecessary risk to BBVA’s balance sheet,” said Andrew Lowe, analyst at Berenberg. “With 90 per cent of Turkey’s government debt denominated in US dollars, it is exposed to a strengthening dollar.”

BBVA said the purchase would boost its net attributable profit by about €165m in 2018 and achieve a return on its invested capital above 20 per cent, based on consensus analyst estimates for Garanti.

It will knock 19 basis points off the bank’s common equity tier one ratio – a key benchmark of balance sheet strength – from 10.90 per cent in December. The bank said it was on track to hit its 11 per cent target this year.

Adrian Cighi, analyst at Royal Bank of Canada, was more sanguine about the deal. He said:

The Turkish market remains a fundamentally attractive banking market, with high returns and best in class digital penetration and adoption; we acknowledge however the recent geopolitical headwinds are likely to continue to provide a source for continued short term volatility in the shares.

Copyright The Financial Times Limited 2017. All rights reserved.
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